Saturday, February 26, 2011
All of us try to write great philosophy, and only a handful of people in the last two and a half millennia have succeeded. [In this way, philosophy is rather like poetry. No one sets out to write mediocre poetry, but plenty of historians conceive of themselves as writing solid, useful, journeyman history.] I actually read very little, because I learn next to nothing from mediocre philosophy. But I have very sensitively attuned antennae that tell me when a book is one that I ought to read, because I may be changed by reading it.
The great works of philosophy, I believe, have been written by authors who -- if I may put it this way -- could sometimes see better than they could say. Plato, Aristotle, Descartes, Hobbes, Hume, Leibniz, Kant -- all of them had deep and powerful intuitions that they strove to articulate as clearly as they could. Quite often, the surfaces of their writings are filled with inconsistencies, contradictions, lacunae, unclarities. My job as a reader is to try to grasp the underlying idea, the intuition that drives them, and then to bring it to consciousness, spell it out, clarify it, until I can see it in all its beauty and power.
In a manner of speaking, I view reading a work of philosophy as a gamble. I gamble my time and energy on the bet that there is a powerful idea somewhere in it that I am willing to try to wrestle with until I can bring it into the open and examine it. Sometimes, of course, I lose the bet. I find that there is no powerful idea lurking in the text, and so I have wasted my time. But in struggling, as I have at one time or another in my life, with Hume's TREATISE, Kant's CRITIQUE, Marx's CAPITAL, or Kierkegaard's PHILOSOPHICAL FRAGMENTS, I have been rewarded again and again by what I have found. The implication of these remarks is that, as I conceive it, a reading of a philosophical text is a very personal and idiosyncratic undertaking. Many people have found great rewards in those parts of Kant's CRITIQUE that I consider so much boiler plate or filler, unworthy of serious attention. [When I was a graduate student, I and a small group of fellow students spent a year studying Kant together. I rejected Kant's architectonic as uninteresting and superficial, but the late and much missed Sam Todes found in it a source of great inspiration. We had wonderful arguments about the question, but I would never dream of suggesting that he had been wrong and I right.]
When I first read Rawls' early essay, "Justice as Fairness," it seemed to me that he had his hands on a fascinating and potentially powerful idea, so I engaged with it. What finally appeared in A THEORY OF JUSTICE was a much revised version of that idea, fleshed out with vast quantities of economics, moral psychology, and political science that I thought was outdated, uninspired, journeyman stuff. Therefore, in the book I wrote about his work, I ignored all those hundreds of pages, not because I thought they were unimportant to him -- quite the contrary -- but because I thought they had no spark of inspiration or interest at all.
The powerful idea was that one could use the techniques and modes of analysis of Game Theory to prove, or at least try to prove, a genuinely original and powerful theorem. Had Rawls succeeded, it would have been a triumph, in my judgment. But I concluded that he had failed. To my way of thinking, Reflective Equilibrium, the Strains of Commitment, and all the rest of it, was just so much filler, a kind of philosophical doodling not rooted in any powerful or interesting idea.
Many readers of A THEORY OF JUSTICE will disagree with me, of course. So be it. I have no urgent desire to argue with them. All I can do is extract from the text what looks tom me to be an original, powerful, and interesting idea, subject it to sufficient clarification that I can tell whether it succeeds, and then show the results of my efforts to my readers as clearly as I can.
Friday, February 25, 2011
Now, the world we helped to create and on which we have relied is coming undone. Not even the dissolution of our premier enemy, the Soviet Union, caused us to reconsider, let alone revise, the premises on which our entire foreign policy has rested for almost all of my life. But what is happening in North Africa and the Middle East holds out the promise of a fundamental reorganization of the world geopolitical order.
There is an opportunity here for a radical break with the past that would nevertheless continue to serve the long-run interests of capital [it is not even worth fantasizing about a future in which the American state is committed to anything else.] Obama needs not simply to adjust to what is happening in the world but to embrace it, own it, support it. He needs at long last to sever our ties with regimes like that in Saudi Arabia. There is no serious danger that this could lead to a cut off of our oil imports. Oil is fungible [with some minor caveats about different kinds of crude] and is sold into a world market. The nations that supply the bulk of the world's oil have no choice but to sell it. Their survival depends upon doing so. At the same time, Obama needs to terminate the costly, futile, destructive, pointless wars in Afghanistan and Iraq. Neither nation is where the real action in the Middle East is taking place.
Will Obama take either of these steps? I see absolutely no sign that he is inclined toward either. Nor, I might add, is any other major American public figure. Doctrinaire libertarians like Ron and Rand Paul are sympathetic to a minimalist foreign policy, but they carry no weight either in their own party or among the right wing fanatics who support them.
Fortunately for the hundreds of millions of Muslims, young and old, who are risking their lives in these uprisings, America's failure to support them actively will not condemn them to failure. But we are shamed as a nation by our failures at this moment.
Thursday, February 24, 2011
The first is the enormously important announcement by the White House and the Department of Justice that it would henceforth not defend the Defense of Marriage Act [DOMA] in court, and instead argue that it is presumptively unconstitutional. This represents a major new step by the Obama Administration in the direction of LGBT equality. The key element in the announcement is the White House opinion that differential treatment for Gays and Lesbians must pass what the courts call a "heightened scrutiny" test. Three levels of scrutiny have been defined in Supreme Court cases -- the lowest, relatively easy to pass, is simply that the legislature must show some "rational basis" for its enactment. This rules out blatant irrationality and prejudice or favoritism. The second standard -- much more demanding -- is "heightened scrutiny." To clear this bar, the state must show both that it has a compelling interest in discriminating against some population, and that its legitimate interest could not have been accomplished in a way that did not involve the differential treatment. "Strict Scrutiny" is the third and highest standard. Heightened scrutiny is essentially like strict scrutiny save that in a very limited number of situations involving different treatment for men and women, the court has allowed the differential treatment when it is based on objective differences between the sexes [separate bathrooms, say.] Racial discrimination is required to pass the strict scrutiny standard. Both standards treat the discrimination as presumptively unconstitutional, so that the burden is on the state to justify it. If the courts accept the Administration's claim that same sex discrimination must pass a heightened scrutiny test, it will transform the status of Gays and Lesbians in the United States. At a time when so much else is happening politically and internationally, it is extraordinary that Obama has taken this step. DADT [Don't Ask Don't Tell] and DOMA were the two big items on the LGBT hit list when Obama was running for president. He has successfully engineered the repeal of DADT, and he has now made a major move to defeat DOMA in a climate in which there would be no chance at all of Congressional repeal. It is time, I think, for progressives to acknowledge as much.
The second subject for comment is the pro-union rebellion that has erupted in the MidWest, in response to the ham-handed efforts by Governor Walker of Wisconsin to strip public sector workers of the right to organize and bargain collectively. The final destruction of labor unions has been a goal of the Right Wing in this country forever, and they have been very successful in destroying organized labor in the private sector, but public sector workers [police, fire fighters, teachers, etc.] have remained a bastion of union strength. In the old days, when Republicans like Eisenhower led the party, union rights were accepted and endorsed. It is not just an old man's nostalgia that leads me to see present-day America as a throwback to a terrible nineteenth century time. The reaction to Walker's efforts is the best thing that has happened in American politics in quite some time. It is spreading -- indeed, metastasizing -- and looks to give to the Progressive wing of the Democratic Party the sort of energy that lately has been reserved for the extreme right wing of the Republican Party. It is impossible to tell how this will play out, but Walker's idiocy -- being punked by the fake phone call, for example -- is helping us no end. By the way, anyone who doubts the truth of simple-minded conspiracy theories need only read the transcript of Walker's phone conversation with the soi-disant billionaire Koch brother. There are times when it is really hard to distinguish reality from political satire.
The third matter for comment, of course, is Libya, and more generally the eruption of anti-dictator sentiment and action across North Africa and in the Middle East. The bloodshed in Libya is, quite frankly, what I feared and expected in Egypt. The almost bloodless fall of Mubarak was astonishing, but Gaddafi's vicious, brutal death throe in Libya is what one would expect from a dictator backed against a wall. The only hope for a speedy ending of what has become a civil war is the continued defection of military units from the palace. Already, several Libyan pilots have crashed their planes into the Mediterranean rather than carry out orders to attack the rebels. I have lived for most of my adult life with an Arab world frozen into rigidity and dictatorship. I cannot even begin to imagine the direct and indirect consequences of the upheavals now taking place, but I am certain that two or three years from now, the world will look very different. Better? God, I hope so. But different. Certainly.
All in all, a good day for the left, I think.
Wednesday, February 23, 2011
As most of you will be aware, Rawls first sketched the theory that would later become the subject of his book in an essay entitled "Justice as Fairness." In that essay, he offered two principles of justice, the first an equal liberty principle and the second a principle of distributive justice usually referred to as "the difference principle." Rawls claimed, in the essay, that individuals exhibiting what Hume had described as the circumstances under which the idea of justice arises and committed to a bargaining procedure designed to arrive at unanimously agreed upon principles for regulating their social interactions and institutions, would necessarily [as a Theorem of Bargaining Theory] coordinate on those two principles. In point of fact, this claim was wrong, a fact that I demonstrated in an essay published in THE JOURNAL OF PHILOSOPHY. In a second essay, entitled "Distributive Justice", Rawls, who appears to have recognized the invalidity of the theorem quite independently of my criticisms, introduced the famous device of the "veil of ignorance" and revised the two principles, this time rewriting the difference principle so that, for the first time, it made reference to the "least advantaged."
There is nothing surprising or noteworthy about the fact that Rawls' revised his principles. He tried a first formulation, discovered that it would not fly, and dramatically altered his theory so that he might plausibly claim to be offering a Theorem in Bargaining Theory. But in A THEORY OF JUSTICE, Rawls does something that I find genuinely weird. He puts forward the first formulation of his two principles, correctly observes that it cannot be the solution to the bargaining game he has imagined, and then asks the question, "What other interpretation of these two principles might we find that is more plausible and defensible?"
Now, this question simply makes no sense. Why on earth suppose that the words must be preserved, but that they need a new interpretation inasmuch as the interpretation readers might be led to put on them -- the interpretation Rawls himself placed on them in his first article -- cannot be defended? Let me put it this way: With respect to what other text do readers and interpreters regularly engage in this sort of inquiry? The answer leaps immediately to mind -- Divinely Revealed Texts.
When devout readers of the Bible find a text that rational persons simply cannot take literally, they have one of two possible responses. Since the text is the Revealed Word of God, they can either deny reason and accept the words as written -- which is to say, they can become Fundamentalists, Inerrantists. Or they can employ the techniques of textual interpretation originally devised for such occasions and find an interpretation that allows faith to lie down with reason.
What I find so strange about Rawls' mode of discourse is that he appears to view the two principles as revealed texts that cannot be altered -- as though they were of divine origin -- but also cannot be assigned what seems to be their most obvious meaning. Since Rawls is a rationalist, not a fundamentalist, he opts in Chapter Two of A THEORY OF JUSTICE for what can only be described as scriptural interpretation, coming up eventually with the final, mature version of the two principles. [These too are, as it turns out, not a plausible solution to his bargaining game, but that is neither here nor there.]
Well, I must gather up my things and go off to class. I just thought some of you might find this interesting.
Tuesday, February 22, 2011
The subject is index numbers, and their difficulties. Wallyver references Paasche and Laspeyres index numbers, which, as he says, are the industry standard, though by no means the only measures out there. There are two problems with price indices, only the second of which is addressed by the efforts of Paasche and Laspeyres [two old-time economists, needless to say.] Both problems arise when one is trying to measure the rate of inflation. As I explained a while back in an earlier post [part of my How to Study Society series], the first problem is that different households spend their available income in different ways -- one household spends a huge proportion on housing, and almost nothing on education; a second spends relatively little on housing, a great deal on education, and in addition buys lots of clothes. And so forth. Since prices change from year to year in a wide assortment of ways, some rising a lot, some a little, and some falling, whether a household experiences a high or low rate of inflation will in part depend on how it spends its money. It would, of course, be possible, although absurd, to construct an inflation index for each separate household, but once having done that, how on earth would you aggregate them to arrive at something identifiable as the economy-wide inflation rate? The simple answer is that it cannot be done, which means that the Consumer Price Index [or Producer Price Index, or any other similar price index] is a fiction. It is not an approximation -- that suggests there is a real or true number that in practice we can only approximate. But that is false. There is no such number. Wallyver refers to attempts to craft price indices that are deliberately weighted to reflect the experiences of ordinary low or middle income households rather than rich households. This attempt, of which I was quite unaware [like so much else, alas], is one of many interesting attempts that have been made to formulate economic measures that are designed to express a progressive ideological perspective [such as, for example, revisions to the Gross Domestic Product that take account of unpaid household labor by women.]
The second problem, which Paasche and Laspeyres address, is that households, in response to price changes or other considerations, typically alter the mix of goods and services that they consume. One household may decide to eat less fish and more meat, because fish these days is a good deal more expensive at the market than fish. [Example: I have to pay upwards of $20 a pound at Whole Foods for tuna or swordfish, but yesterday I got really nice bone-in pork loin chops for half that price. When I was a young Instructor, fifty plus years ago, the situation was precisely reversed -- fish was cheap, meat was expensive.] Another household may cut back on its recreational budget because it is putting a daughter through a pricey college.
In general, from one year to the next, both the quantities and the prices of the goods in the typical market basket [assuming there is such a thing] will change, and not all in the same direction either. So, how to compare the price of the market basket of goods and services purchased in the base year with the price of the market basket of goods purchased in the current year? [The universal practice is to choose some year as the year against which every later situation is being measured -- the so-called base year. The index for that year is arbitrarily put at 100. Then, each subsequent year can be seen easily as some percentage increase or decrease of the base. So a price index of 112 means a 12% rise over the base year.]
Paasche and Laspeyres each offered a proposal, and as will become clear, they are two different, equally plausible, and totally arbitrary ways of trying to square the circle. Paasche said: Let's compare what it costs a household to buy its current market basket of goods and services at current prices with what it would cost that household to buy the same market basket of goods at the prices that reigned in the base year. Laspeyres said: Let's compare what it would cost, at today's prices, for a household to buy the market basket of goods and services that they bought in the base year, with what it actually cost them to buy that same market basket of goods at the prices in the base year.
Hmm. How does either one of those measures help us? Not a lot, I am afraid, since both involve counterfactual assumptions. To Paasche, we must say: But the household didn't buy the current market basket of goods and services back then in the base year. That is just the problem. The shape of their purchases has changed. To Laspeyres, we object: But the household is not buying, this year, the market basket of goods and services they bought in the base year. Now Paasche and Laspeyres knew that, of course, as did everyone else who contributed to this literature [including the late, great Irving Fischer].
Wallyver notes that the difference between the two numbers, over a single year, is likely to be very small. That would be a heartening fact if there were some objective number that we were trying, experimentally, to approximate. After all, in real science, where margins of error are a universal fact of life, a very small margin of error is cause for elation. BUT THERE IS NO OBJECTIVE QUANTITY THAT THESE VARIOUS MEASURES ARE TRYING TO APPROXIMATE. In the immortal words of Gertrude Stein [who was, I believe, talking about Oakland, California], "there is no there there."
Since I have started this riff, let me mention two problems with price indices before I knock it off and invite Wallyver to respond, should he wish to. The first problem is that in addition to changes in the contents of the market basket purchased by the hypothetical typical household, there also occur changes over time in the range of goods and services available to be purchased. IPads did not exist ten years ago [I think.] If a household buys an IPad, neither Paasche nor Laspeyres nor any other index designer has a way of factoring that into an index. [This is, in odd ways, akin to the problem of describing the rational choices of agents whose utility functions themselves change over time -- see my comments on military strategy and Game Theory in my Formal Methods blog.]
The second problem concerns changes in the efficiency or performance of goods customarily considered members of the same category. We are all aware of the dramatic improvements in memory, speed, and general performance of computers oer the last thirty years or so. How does one take that into account when trying to answer the Paasche or Laspeyres question, "What would the computer I bought this year have cost in the base year?" [or alternatively, "What would the computer I bought in the base year have cost this year?"] "The" computer? Are we comparing an Apple IIE [my very first computer] with an iMac?
Well, enough said, I think. I invite the fellow nerds out there to respond.
Monday, February 21, 2011
Right now, we are witnessing a blatant and unabashed effort by an emboldened right wing to strip working men and women of the simply right to organize and bargain collectively. Let us not be misled. Republicans are attempting to dismantle, piece by piece, the structure of social justice and welfare that it has taken a century and more to construct. They want to eliminate labor unions, terminate Social Security, phase out Medicare, get rid of safety and quality controls on products sold in the marketplace, and reduce the vast majority of Americans to the status of virtual serfdom, all in the name of free markets, liberty, and the American Way.
This is a fight worth fighting, and each one of us must do whatever he or she can do to support those who are on the front lines. Give money to the strikers and the Wisconsin State Senators who have absented themselves to block the Governor from forcing through a bill to destroy public employee unions. Sign petitions, go to rallies, and proclaim everywhere the truth that labor organizing is, in our country at this time, THE progressive thing to do. It is more important right now than buying a Volt or separating your garbage for recycling. It is even more important than saving the whales, although all of those are worthwhile efforts.
This fight began in earnest with the successful attempt by that Potemkin Village of a man Reagan to kill PATCO [google it, if you don't' know], and it will not stop until we have driven the troglodytes back into their caves. There cannot be a compromise on this issue, because our success in winning it is the condition for all future meaningful compromises on any other issues of public policy. It is fully as important as ending slavery.
It would seem, if this argument is correct, that things are proceeding just as Marx anticipated. As capitalist social relations mature, the elements of socialist planning begin to develop deep within the corporation, which is truly the womb of capitalism. Why then are the prospects for social and economic justice so bleak? Why has the term “late capitalism,” once used by socialist theorists to describe what they confidently believed to be the death throes of the established order, now become a wry joke shared, with sighs and the rolling of eyes, by aging radicals like myself? Why have any signs of a true movement of the masses died out, to be replaced by an identity politics that is fundamentally assimilationist rather than revolutionary in its thrust? In short, if all is going as predicted, why aren’t we having any fun?
The answer, I think, is that along with everything that he got right, Marx got three big things wrong, with the result that the liberatory potential he saw in the internal contradictions of capitalism is nowhere in evidence today. Let me say something about each of these failures of analysis or prediction.
First, Marx completely failed to anticipate that the capitalist state would develop the ability to manage and, to some extent, to control the increasingly wild booms and busts that threatened to destroy the capitalist order. He quite presciently foresaw that the ever more rational organization of production within the firm would come into contradiction with the anarchic distribution of the market, resulting in crises of over-production and under-consumption. The great crash of ’29 was just what the good Doctor of Philosophy ordered, albeit too late to gladden his heart.
But Marx was convinced that capitalists, confronted with disaster, would be unable to coordinate their actions in order to save their skins. In an odd way, he was too much in thrall to the classical economic theory he had subjected to such a penetrating critique in Capital. It took imaginative theoretical and practical defenders of capitalism like Keynes and Roosevelt to see that with far-sighted fiscal and monetary policies, the state could sufficiently dampen the business cycle to enable capitalism to survive. To put the point differently, Marx, very much in common with the other economists of his day, failed to see how powerful the state had become under capitalism.
The pulse still quickens in the circles I frequent when the tech stock market bubble bursts or Paul Krugman forecasts a calamitous reversal in housing prices, the way old war horses flare their nostrils and stamp their hooves at the sound of distant trumpets. But the truth is that our corporate masters will never again allow a serious threat to the foundations of the economic house they have built.
Our mature capitalist economy is no longer the unplanned, unintended consequence of the playing out of market forces, for all the lip service that its apologists pay to “free enterprise” on festive occasions. Rational planning is as pervasive at the macro-economic level as it is within the firm. But that planning – far more sophisticated and nuanced than either Marx or the state planners of the
The second obstacle to the development of a revolutionary working class movement has been the persistence of pre-capitalist passions and attachments that Marx was convinced capitalism’s invasive rationalization of economic life would weaken and ultimately destroy – nationalist loyalties, ethnic identifications, racial antagonisms, and religious faiths. The secularization of life seemed to be well under way in Marx’s time. The Catholic Church had lost its grip on public life in
The optimistic confidence that class interests would defeat the irrationality of nationalism reached its height in 1914, as socialists world-wide – my grandfather among them – refused to believe that French and German workers would fight one another in the trenches at the behest of their capitalist masters. With the bloody refutation of that belief, something died in the heart of the socialist movement. To be sure, the unanticipated success of the Bolsheviks in Russia encouraged some to believe that despite all, the proletarian movement was on the march [though not my grandfather, who sided with Norman Thomas and the Mensheviks]. But the success first of the Soviet Union and then of Mao’s revolution in China, important as it was to the unfolding of the twentieth century, had nothing at all to do with the birth of socialism in the womb of capitalism.
At this nightmare moment in recent history, little need be said about the persistence and intensification of ethnic and religious antagonisms throughout the world. Try as we may, we socialists can no longer cling to the hope that class interests will unite men and women across national, ethnic, racial, and religious divides in a vibrant revolutionary movement to replace capitalism with a humane, just, egalitarian social order. Capitalists are doing their part. Not only are they crafting the elements of rational planning that a socialist economy would require. They are in the forefront of efforts to put the divisiveness of race, ethnicity, nationality, and religion behind us, for these divisions are not good for business. It is the people who remain mired in self-destructive and self-defeating irrationality.
Marx’s third and most serious mistake concerns the direction in which the labor force evolved as feudalism gave way to early capitalism, and then to the mature capitalism we see today. In the middle of the nineteenth century, when Marx was doing the British Museum research on which his hauptwerk was based, one of the most striking changes taking place in British society was the destruction of the old crafts – weaving, spinning, woodworking, and the rest – and the incorporation into machinery of the skills they once required. In late feudal and early modern times, a working man was known by the trade he plied, learned in a long apprenticeship and symbolized by the kitbag of tools he brought with him to the job. The complex social structure of crafts left indelible marks on the family names that so many Americans bear today – Wheelwright, Carver,
Capitalism ate away corrosively at the craft tradition, deskilling artisans and turning them into a homogeneous pool of semi-skilled workers who could master the skills of a factory job in a few weeks and were thus available to be moved easily from job to job by the fluctuations in the market demand for industrial labor. Marx saw this progressive homogenization of the labor force as the correlate to the process by which small independent entrepreneurs were being crushed by competitive forces and absorbed into larger and larger firms driven to expand by a need to achieve control over their input and output prices. He foresaw a world in which a united industrial working class would confront concentrated capital, until finally, when a major crash had fatally weakened capital, labor would seize control of the means of production and substitute socialist planning for capitalist anarchy.
It was not only an inspiring dream, at least for some of us. It was also a quite plausible projection of trends that were working themselves out powerfully in Marx’s day. But it was not to be. On the side of capital, as Marx anticipated, relentless concentration did take place, leading to the world of vast multi-national conglomerates with which we are all familiar. To be sure, a subordinate domain of small business flourished, rather like the flora that live under the soaring canopy in an Amazon rain forest. Nevertheless, Marx got that part of the future right.
It is on the side of labor that things have not progressed as Marx imagined they would. For a time, the growth of industrial capitalism did indeed produce a vibrant labor movement that evolved very much as Marx expected. First individual factories, then entire industries, finally entire national labor forces were organized, giving rise in the
But as industrial capitalism gave way to a complex mix of industrial and service firms with huge, bureaucratically managed assemblages of employees, the leveling and homogenization ceased. There came into existence a pyramidal hierarchy of job categories with sharply unequal wage, salary, and compensation schedules. Instead of a world in which the propertyless masses sell their labor and are poor, while the owners of capital hire labor and live on the profits from this unequal exchange, we see today an economy in which even the very rich, by and large, are salaried, and capital is owned by share holders who exercise little or no control over what is nominally their property. Indeed, comfortably compensated and securely tenured economists like Paul Samuelson, bemused by the reversibility of their equations, have taken to saying that it makes little effective difference to the economy whether capital hires labor or labor hires capital.
This highly unequal allocation of the rewards and burdens of labor has undermined that solidarity on which Marx was counting. Steel workers, miners, and textile operatives could forge some degree of unity, despite their geographic dispersion and the many differences in the nature of their jobs. Even hospital and hotel workers, secretaries and fast food workers, could find some common ground on which to stand in their struggle against the exploitation inflicted on them by capital. But whatever theoretical connections there might be between them and lawyers, middle managers, and tenured college professors, the gap in the salaries and conditions of labor between the two groups, the utter disparity in their life experiences and life chances, have made a fruitful solidarity out of the question. Workers have grown progressively less unified, until at long last, Organized Labor has come to be, and to be seen, as nothing more than an interest group, on a par with, but often less powerful than, gun owners, retirees, and fundamentalist Christians.
All of us are familiar with this world, for it is, after all, our world, and we understand intuitively that our life chances are determined not by whether we own the means of production, but rather by where on the pyramid of jobs we end up. It is worth taking a moment to look at a few facts and figures, simply to remind ourselves just how steep that pyramid is. I am referring not to the much-discussed explosion of compensation at the highest executive levels, but to the deeply entrenched inequality all up and down the pyramid. [These numbers come from Bureau of Labor Department tables, and date from 2004. I have not bothered to update them, but the thrust of what I am saying remains correct.]
In the town of
Not surprisingly, the numbers are much worse for African-American families. Now that the federally mandated minimum wage is on its way up to $7.25 an hour, a Black husband and wife working fulltime minimum wage jobs can look forward to the time when their annual household income of $29,000 puts them solidly in the Black Middle Class, with more than forty percent of Black households doing less well.
T he shape of the income pyramid in
Apologists for capitalism, who are now as common as houseflies, like to offer two connected explanations for the inequality in wages and salaries, which taken together are intended as a justification as well. The first rests on a misinterpretation of a famous eighteenth century mathematical theorem, the second on a common logical fallacy. Mathematics first.
Leonhard Euler, the great Swiss mathematician, proved a theorem about linear homogeneous functions that was, in the nineteenth century, given an important economic interpretation. The theorem was construed as saying that under certain conditions, the wages paid to workers in a free and competitive labor market exactly equal their marginal contribution to the output of the firm for which they work, or, as it is sometimes called, their marginal product. Thus, if a vice-president in an executive suite makes more than a secretary in the steno pool, that is because the vice-president contributes exactly that much more to the productive activity of the firm. It would be both unjust and inefficient to take away some of the executive’s pay and give it to the secretary, even though they are both, no doubt, nice people and hard-workers.
The problem with this rationale for unequal pay is that it turns out, upon closer inspection, not to apply to any known or even possible capitalist system. In the first place, the theorem holds only for economies whose production function is linear homogeneous [assuming that it even makes sense to speak of the production function of an entire economy], and as is easy enough to show, this is equivalent to saying that the economy is in long run equilibrium. But as Marx pointed out, and as every economist since has reaffirmed, capitalism is never in long-run equilibrium. A capitalist economy is always engaged in what Joseph Schumpeter, in a famous phrase, called creative destruction. Furthermore, it follows directly from Euler’s equation that a firm with a linear homogeneous production will, if it pays each of its employees his or her marginal product, make a zero profit, and a firm regularly making zero profit will of course cease to exist.
All of this is quite well known to all economists, but it has not dissuaded them and their epigones from wrapping themselves in the sanctity of mathematics whenever proposals for wage and salary equalization surface.
So much for mathematics. Now logic.
When economists are asked why some employees are so much more productive than others, and hence deserving of such inflated compensation, their standard answer is education, or, as they sometimes say in an attempt to make the answer sound more impressive, human capital. Actually, that last sentence inverts the real order of explanation, and thus participates in the ideological rationalization that I am attempting to debunk. Let me restate the point: When asked to explain the striking inequality in compensation schedules, economists begin by assuming that the inequality must be justified, for to think otherwise would be to call into question both the foundation of American society and their own comfortable compensation. Those of us at the top of the income pyramid must have a much greater marginal productivity, they conclude. And how can that in turn be accounted for? Education.
Now, it is demonstrably true that in
But this fact does not imply that the shape of the income pyramid itself is in any way determined by the levels of educational attainment in the work force as a whole. If you have a college degree, your chances of climbing up the pyramid at least to the middle levels are quite good. But if everyone gets a college degree, the pyramid will not flatten out, because there are only so many jobs at the middle level.
To think otherwise is to commit what logicians call the Fallacy of Composition, which is simply the mistake of thinking that because something is true of each member of a group, it can be true of them all. Each of us, we may suppose, can with hard work and determination, be above average, but only in Lake Woebegone can all the children be above average.
Because the American economy is so large, it is easy to lose sight of this simple truth. For each individual, or for all immigrants, or for all African Americans, or even, within limits, for all women, it is indeed true that greater educational attainment will tend to lead to higher compensation, but that is only because the individuals or the group will over time displace some of those in the favored slots. If all the applicants for jobs at a corporation present themselves to the Human Resources Office with MBA’s, the Board of Directors will not terminate the positions of secretary, mail room clerk, and claims adjuster and make everyone a senior manager!
There is one way in which a dramatic educational upgrading of the entire workforce might conceivably trigger a flattening of the entire income pyramid. With better prepared workers available, corporations might shift to different and more profitable production techniques, and those new techniques might result in an array of job positions with more equal associated compensations. Economists would say that the positions defined by the new production function had more equal marginal productivities, which, as we have seen, is nonsense, but nevertheless, the end result might be a flatter pyramid.
Is this likely to happen? Well, for more than one hundred years, the average level of educational attainment in
What then does explain the shape of the income pyramid? A number of bright economists, willing to challenge the received wisdom, have been puzzling over this question for several generations. More than thirty years ago, Lester Thurow, the MIT economist who served there for a while as Dean of the
Thus, there is little prospect for the labor solidarity on which a successful socialist transformation must be built. It is now the best of times and the worst of times. Economic rationality marches relentlessly on, while poverty and inequality harden into permanent injustice, and racial, ethnic, national, and religious rivalries tear the world apart.
What can we anticipate for the future? What will my grandfather’s great, great grandson, my grandson Samuel, inherit as he grows to maturity? The impetus within corporations to substitute economic planning for subservience to market forces will strengthen, as the managerial class responds to the imperatives of institutional rationality. Meanwhile, the obscene gap between the gilded life chances of the fortunate and the life-threatening poverty at the bottom of the world economy will persist and come to be seen as an inevitable concomitant of the rational workings of the market.
There will always be class traitors like myself who rail against the inequality from which they personally benefit. But though our excoriating tracts may bring us tenure and advancement, the revolutionary transformation they celebrate will seem as fanciful as the Chronicles of Narnia.
What then is the future of socialism? If socialism is the substitution of rational planning for the anarchy of the market, it is already upon us. If socialism is the achievement, at long last, of justice and equality, it is a dream that has been aborted in the womb of the old order.
Sunday, February 20, 2011
I need hardly reference what is happening in the Middle East. All I can do is watch and hope and marvel at the speed with which seemingly thoroughly entrenched dictatorships are beginning to shake and crumble. I weep for those whose lives have been lost in the uprisings, but I allow myself to hope, perhaps even to believe, that irreversible changes are under way.
Here at home, my eyes are on Wisconsin, of course. There is very little I can do about that either, save to give money, so I have joined Russ Feingold's newly formed Progressives United with a pretty good donation, and I have also given a hundred dollars to the twelve Wisconsin State Senators in absentia. This is painless for me, but it is something, and I can at least comfort myself with the thought that if every like-minded person in America made a donation, large or small, it would add up to a very substantial sum.
This is a country in which fewer than 60% of eligible voters vote in presidential years, and little more than a third in off years. Thus it is that enthusiasm, voter mobilization, turnout is everything. A simple calculation makes the point. There are not quite 230 million citizens eligible to vote, of whom roughly 180 million are registered. About 70% of the registered voters vote in a presidential year, leaving 30% not voting and an equal number unregistered. Suppose that in a bad year for the left, Republicans win 52% of the votes and Democrats win 48%, and suppose as well that the 30% of registered voters who do not bother to vote would break in roughly the same proportions if they all came out to the polls. That means that the Republicans get about 65.5 million votes and the Democrats get 60.5 million, a 5 million vote shortfall, which is enormous. But there are 54 million eligible voters not voting, of whom roughly 26 million are Democrats. If the Democrats can get only 20% of them to the polls, they win, although not by much.
What we are seeing in Wisconsin is a brazen attempt by the Republican governor to gut the unions, which are the major get out the vote machine for the Democrats., In response, opponents of the governor's move, supporting the unions, have poured into the streets in astonishing numbers. The great beast has been awakened!
At the same time, as Frank Rich notes in today's NY TIMES op ed piece, the air is starting to go out of the right wing balloon. Glenn Beck, surely the craziest and most dangerous demagogue to appear on the American scene in a very long time, has lost half of his audience in the past year. Sarah Palin has become a joke to much of America, and despite her fervent band of admirers, no longer carries much political weight even in Republican circles.
We need to mobilize, and the list of horribles being attempted by state and federal Republican lawmakers may turn 0ut to be the most effective organizing tool we have.
I refuse to believe that I am simply giving voice to irrational optimism. I have lived long enough to see America come alive several times, and this is beginning to smell like another such moment. Deo volente.
My point about index numbers was this: because there is no solution to the index number problem -- i.e., no objective, ideology-neutral way to form such measures of social reality -- every effort to grasp conceptually the nature of social reality is unavoidably ideological. This reveals a deeper truth, which is that social reality itself is ungetoverably normatively structured, embodying [in a way that physical reality does not] a perspective or point of view or normative dimension, or indeed more probably several that are in conflict with one another. From this insight, I draw the conclusion that a value-free social science is impossible [and that includes economists as well as sociologists and political scientists, of course].
The point about the accounting discussion is different, but in many ways strikingly similar. Because there is no objective "scientific" solution to the accounting problem once capitalism develops beyond its most primitive stages, supposedly objective decisions concerning profitability in a firm inevitably turn into quasi-political decisions or negotiations among the interested parties. This, I suggest, is part of the process anticipated by Marx by which the new social relations -- of socialism -- grow in the womb of the old capitalist order. If I am correct, then profit-maximizing capitalists have no choice but to engage more and more in decision making whose structure is political rather than, in the old sense, economic, and this fact robs the defenders of capitalism of their strongest argument, which is [pace Hayek] that market-driven decisions are necessarily the most efficient. The problem is not that they are less efficient, but that they are impossible. [By the way, for those who are really into this sort of thing, this is exactly the criticism that Oakeshott has of rationalism in politics, namely that it is impossible, not bad.]
Does that clarify things a bit?
Perhaps the best way to begin is with the classic essay by Ludwig von Mises entitled “Economic Calculation in the
The first thing to be said is that in 1920, von Mises was dead right, and I think it is a fair guess that Marx, had he been alive, would have agreed. Von Mises was of course looking at the fledgling Bolshevik government that had just seized power in
So von Mises was certainly right with regard to the world he was looking at in 1920. The market clearly did a better job of allocating scarce capital resources than any group of planners could, even though
But von Mises was fundamentally wrong in his conception of the question under debate. Marx did not think that socialists could do a better job than capitalists of running a capitalist economy. Marx had only the greatest admiration for the explosive efficiency of capitalism. No one has ever penned more effusive panegyrics to capitalism than Marx. What Marx said was that inevitably, ineluctably, socialist relations of production would develop within capitalism, devised and advanced by capitalists, not by socialist moles burrowing into the heart of enemy territory in an effort to undermine their fortresses.
If market forces were adequate to the task of making rational allocations of scarce resources, there would be no internal impetus for the evolution of new ways of organizing production. But as we have seen, in a large modern corporation, the play of the market does not of itself resolve questions of allocation, resource use, and profitability. Capitalists do not develop internal planning models of economic decision making because they have been seduced away from the faith of their fathers by tenured radicals on effete Eastern campuses who have never met a payroll. They develop new modes of corporate decision making because their accountants and financial experts cannot tell them, in a neutral, objective fashion, which of the available alternatives will be most profitable. Our cardboard C. E. O., struggling to decide which of his division managers has made the most significant contribution to the firm’s profits, must somehow resolve the disagreement between the two over the proper allocation of the fixed costs of the building in which their production takes place, and over the proper amounts to be charged against the box division’s accounts when it draws its raw materials from the stocks produced by the cardboard division.
Once the firm’s president becomes persuaded by his accountant’s argument, he realizes that the disagreements between his division managers will have to be worked out politically – they will either have to be negotiated, or else he will have to decide them by an exercise of sovereign authority.
In either case, what has happened, even in this very elementary case, is that a decision originally made for the firm by the market, and then made for the firm by an accountant, now has been transformed into a political decision to be made essentially by some form of political mechanism. In short, economic calculation has been replaced by political planning.
No doubt, none of the actors in this miniature drama would consider it in the slightest appropriate for what is usually called the political system to get involved in deciding how fixed costs are to be allocated in the cardboard carton firm. But though there might be many other reasons for keeping the city, the states, or the federal government out of the process, the principal and most plausible reason has evaporated, namely that the decision, being economic in nature, is best made by the impartial working of market forces. The fact of the matter is that the decision is not simply economic – it is not actually an objective scientific decision at all. It is a political decision, required in order to resolve a conflict between the incompatible ambitions of the two division managers, one of whom is seeking to hold his job against the threat of replacement, the other of whom is trying to advance her career by demonstrating her ability to run a division profitably.
The situation we have analyzed in this hypothetical small firm is reproduced throughout the modern capitalist corporate world, with complications, elaborations, and variations that cannot even be hinted at in our example. A major multinational corporation, as has often been remarked, is better compared to a state than to an entrepreneurial firm. Contained within it are huge bureaucratic systems and sub-systems in whose hallways and meeting rooms men and women live their entire working lives. The processes by which corporate-wide calculations of profitability are made involve considerations of tax codes, local ordinances, international trade, exchange rates, inflation rates and regional differential development patterns that are substantially indistinguishable from the corresponding considerations weighed by economic planners in centralized national economies.
The running of such a corporation requires systems of data acquisition and retrieval entirely beyond the capabilities of the eighteenth and nineteenth century capitalist firms on whose behavior the original models of capitalism were based. To manage such information systems, and thereby to coordinate the decisions, the purchasing and shipping patterns, the product development time-tables, and the promotional campaigns of the many divisions of the firm requires an extremely high level of literacy – both linguistic and computer – on the part of lower and middle level, as well as upper level, employees. Until it is possible to get reliable answers quickly to questions about employee levels, warehouse inventories, price shifts, exchange rates and capital availability, those charged with the central planning of the corporation cannot even begin to carry out their tasks.
Nothing resembling this level of information flow, and consequent decision implementation existed in the early capitalist firms, not even in those that grew to great size in the nineteenth century. The importation into capitalist industrial organization of the model of military command and control was due at least as much to the sheer unavailability of any alternative way of managing and coordinating the behavior of large numbers of people as to the ideological affinity of the early industrial magnates for militaristic modes of organization.
In short, when Marx talks about socialism, he has in mind an economy whose stage of development of technology and organization is so far advanced that national planning is technically possible. Such a stage exhibits both a certain level of technology of production, of data generation and retrieval, and of communication, and also a corresponding level of knowledge and skill on the part of workers at every level, not merely at the top. Although Marx failed to foresee the digital computer, it is not far-fetched to say that his conception of socialism presupposed it, or something equivalent.
Marx expected, for sound reasons, that the technology of production, communication, and management required for the central planning and control of an entire economy would develop first within capitalist firms, in direct response to the pressures of competition and the demands of profitability. And so they have. An immediate consequence of this process is the transformation of economic calculations into political decisions, within the firm. Thus, if by socialism we mean the rationally coordinated planning of an entire national economy in such a way as to transform the major economic choices of the society into political choices, responsive to the will of the people, then it is true that socialism has been growing within the womb of capitalism, or at least that the technical preconditions for of socialism can be seen to be developing there.
The economic systems established in the
Note, by the way, that the development of efficient techniques of central planning within a modern capitalist corporation is advanced, not impeded, by the ambition, acquisitiveness, and egocentricity of the managers. Switching over to a planning system in our carton factory does not require the development of socialist consciousness. It requires only that the objective structure of the firm make policy-neutral calculations of profitability theoretically impossible, as in fact they are once the second division of the firm starts to operate. Somewhat more to the point, the coherent management of large modern firms does not require that the capitalist mentality so often credited with the rise of modern capitalism be somehow transcended. The same men [and recently women] who manage the great corporations would, if they were suddenly to find themselves running small firms in a classically competitive environment, adopt precisely the calculations of profitability traditionally conceived as determined for them by the free market. They do not do so when managing large corporations simply because it is technically impossible to do so.
What, then, is the fundamental difference between socialism and capitalism at its most advanced, rationalized, and centralized? Under socialism, economic decisions would be treated [I use the subjunctive because there does not yet exist a socialist society] as collective political decisions, to be made democratically on the basis of the aggregated will of the entire people. In a capitalist society, decisions are taken privately, within the firm, in response only to the interests, the will, or the pressures of those who occupy positions of power within the firm.
The issues available for decision are not at all comparable in the two systems. A socialist society will be presented with choices among economy-wide investment policies or systematic wage policies that simply do not come within anyone’s ambit of decision in a capitalist economy. This, of course, is the principal source of the greater rationality of a socialist economy. But the mechanisms for the acquisition and management of information, and the consequent management of economic activity, will have been developed and tested within the capitalist firm – within the womb of the old society.